For a historian, Adam Tooze spends a lot of time thinking about the present, and the immediate future, of our economic and geopolitical systems. Born and educated in Britain, the 54-year-old professor teaches at Columbia University. His early works included a definitive economic history of Nazi Germany, The Wages of Destruction, and a history of World War I. Of late, he has refocused his lens to take in more recent events at a global level. Crashed, published in 2018, is one of the most comprehensive historical treatments of the global financial crisis. In Shutdown: How Covid Shook the World’s Economy, the best economics book of 2021 in this issue, Tooze has married his research and synthesizing skills with the scene-setting and narrative flair of a journalist to paint a vivid portrait of our current moment. His newsletter, Chartbook, offers data visualizations and shorter takes on the current health of the global economic system. As the worldwide economy continues to grapple with the systemic fallout of the pandemic and the deep-seated issues it has laid bare, whether concerns over inflation, fraying supply chains, or rising public debt, few guides to the terrain are more eloquent than Tooze. He spoke with strategy+business editor-in-chief Daniel Gross.
S+B: Historians have, well, historically been content to leave current events to journalists. But you spend a lot of time writing, teaching, and thinking about what is happening now. How do you account for this shift in your focus?
TOOZE: You can define history as having to do with things in the deeper past. Or you can define history in terms of the method of archival research. But you can also define history as thinking about history. And history has this profoundly puzzling quality—a present moment with a future and a past becomes, in the next moment, a new present in which the previous future is your present and the past is the moment that you previously inhabited. That sense of historical flux is a marker of the modern period. It’s profoundly mysterious. And if you think of historical inquiry and historical thinking in those terms, then in some sense, the most radically relevant thing to do is to try to write contemporary history. My position today is that every historian ought to write at least one piece of contemporary history. Shutdown is an extension of the argument of Crashed. We need to continually expose ourselves to the challenge: is my model robust to what is just outside its current data set—namely, what’s happening tomorrow?
S+B: I think it’s natural for a lot of people to look back to the global influenza epidemic of 1918 for historical lessons and comparisons. Is that too obvious a historical frame of reference?
TOOZE: One shouldn’t exaggerate the continuities between our present and the past. This isn’t a book that seeks to learn lessons from previous pandemics and ask why they weren’t learned. The fact of the matter is that in managing 2020, the lessons from previous pandemics had precious little influence. The Spanish flu that hit the world 100 years ago was far more lethal, but took place in a society that didn’t treat the problems of economic, political, and social management in the way that we do. If you think about the extraordinary figures for casualties that we have for the Spanish flu, we now know that by far the largest numbers were in India and Africa, both of which at the time were colonial territories where the population just wasn’t counted. What’s so staggeringly different is this: I spent years in the archives of 1918, 1919, and can honestly say that I never came across any substantial contemporary discussion of the flu and its economic impact. And that’s not true in 2020. In 2020, COVID became the driver of the single largest contraction the world economy’s ever seen.
S+B: You’ve said that one of the characteristics of the response to the COVID-19 pandemic was that the economic systems were less doctrinaire in response to this crisis than to others. What do you mean by that?
TOOZE: The arguments about economic doctrines of the 1980s and 1990s seem very remote from the way in which policy operates today. It’s much more pragmatic and empirical today. The idea that economic science could provide us with hard-and-fast rules as to how to confront a situation like this, I think, has become quite unfashionable. The European Union, which is ordinarily an organization dominated by rule-following and rule prescription, just simply suspended all its fiscal rules for the duration [removing requirements that countries keep deficits below a certain level]. Emerging markets have increasingly resorted to a very wide range of policy interventions to manage financial risk. And the International Monetary Fund, conceding that one size doesn’t fit all, set themselves the task of seeing whether they could find new general concepts and prescriptions that would describe this much grayer, much more muddled scene.
S+B: In our work, we talk a lot about innovation and agility as a corporate response to the pandemic—for example, companies rejiggering supply chains or pivoting to start producing protective gear. Would you use the terms innovation and agility to describe the global systemic response to COVID?
TOOZE: I think those are elements. The phrase that I repeatedly use in both Crashed and Shutdown is that we live in an age of crisis-fighting rather than innovation and agility. I quite like this notion of experimental governance also. All of these terms reflect the effort by powerful organizations to respond to a world that is more uncertain, less predictable, and less amenable to routine patterns of governance and management. I do think that is a feature of our current moment. And if 2020 is anything to go by, you would expect it also to be a harbinger of the future.
S+B: Economic policymakers always seem to fight the last war. We conquered inflation in the US in the late 1970s and then have been fretting about it for 40 years. We imposed more stringent banking regulations only after the entire system collapsed in 2008. Is there a positive way in which some of the lessons that were learned from the global financial crisis were applied to efforts to manage the impacts of this contagion?
TOOZE: We did not see in 2020 a major banking crisis, which is a huge win. Likewise, the techniques of central bank intervention are now pretty well honed. The emerging markets have learned a lot since the late 1990s about how to manage the risks of financial globalization. That doesn’t mean that everyone gets it or that everyone is going to get away scot-free. But there are very many extremely competent emerging market financial actors at this point. One of the systemic factors to reckon with, though, is that a stabilization of one component in the system may have unintended side effects in terms of increasing instability in other components. When banks had their balance sheets’ size restricted, it inhibited the banks’ ability to act as market makers in the treasury market in 2019 and 2020. Thinking through effects like this is very important.
S+B: One difference between the COVID crisis and the financial crisis, particularly in the US, was that there was a lot of forbearance—banks and lenders were willing to give borrowers a break rather than foreclose.
TOOZE: It hasn’t been universal, but it has been significant. It may have something to do with the politics of the crisis, which is difficult to blame on individual responsibility. Unlike feckless borrowers who were flipping houses in the early 2000s, folks who found themselves in trouble in 2020 could not easily be blamed for their predicament. I think the creditors understood that they would be at risk of reputational damage if they acted in that way. Then there were considerable mandated forbearances on the part of the government. And that produced ripple effects. It’s all very well to insist that landlords cannot enforce evictions, but then you’ve also got to explain how you’re going to handle the impact of that on the credit rating of the real estate investment trust that owns the property. And specifically with regard to low-income borrowers in low-income countries, the amount of forbearance that anyone was willing to show was very limited indeed. The global efforts to provide and get relief were lamentably small-scale.
S+B: What lessons from either successes or failures of handling the fallout of the pandemic will policymakers be able to apply going forward?
TOOZE: One hopes that they learn the lessons in terms of technology policy and science. In the end, it wasn’t our collective abilities to implement social distancing that saved the day. It was, on the one hand, very heavy-duty macroeconomic intervention that put the economy on life support, and, on the other, the vaccine. We managed to achieve this series of miraculous breakthroughs in developing the vaccine—not just the fabled mRNA ones that have garnered so much kudos in the United States and Europe, but the whole suite of global vaccines, some much cheaper, much more basic. Understanding that science is our strong suit and really putting the full weight of political authority and resources behind that seems like the most obvious lesson to learn.
I spent years in the archives of 1918, 1919, and can honestly say that I never came across any substantial contemporary discussion of the flu and its economic impact.”
The sobering fact is that even though the pandemic is not over, we still don’t really have a concerted political push to roll out a global vaccine program throughout sub-Saharan Africa and many of the poorer countries in Asia. And doing so isn’t only a matter of altruism or values or moral leadership; it’s absolutely a matter of self-interest because it’s only when we’ve achieved a real grip on this virus globally that we can have any sense that we are truly shutting down the risks of a very bad variant.
S+B: Looking back, is Shutdown a story of the fragility of our institutions and systems or a story of their resilience?
TOOZE: It’s an alarming story of the huge heterogeneity in our institutions. Some states’ response to these crises have worked well. China, having originally failed to contain the virus, managed to effectively contain it within a month. And likewise, it’s a story about the fact that we can use fiscal policy to enable us to put the economy and society on life support. But of course, it’s also a story, notably with regard to the United States, of the truly dangerous level of fragility in America’s key political institutions.
S+B: Are you surprised by the issues that we’re having now with supply chains and logistics? We seem to have shortages of labor in many developed countries. We’re seeing chip shortages and ships queuing up outside ports. With all our digital technology and ability to gauge demand, you would think our system might be doing a better job at smoothing things out.
TOOZE: The scale is of course something to behold; there’s no doubt about that. My family has been in the business of trying to rebuild a house destroyed by a hurricane in 2019. That has been hard. You cannot buy a complete IKEA kitchen anymore. Even what you might imagine to be a massively integrated, just-in-time, delivery-based business like that can’t keep its ducks in a row. I think it’s more like a moment of truth, really, than a surprise. What it exposes to us is that these highly efficient networks of just-in-time production and delivery are vulnerable to a shock, and this was a very big shock. Chips are a highly cyclical business with long lead times for investment, and chips are prone to boom-and-bust cycles. With shipping, people put the containers where they need them because it makes sense at the time to do it. And folks in logistics are not experiencing this current situation as a crisis. They’re making money hand over fist. Excesses and shortages of capacity are part of how the system develops.
S+B: There’s a lot of discussion and debate about which of the changes we’ve seen—inflation, remote work, reshoring, and aggressive fiscal policy in the European Union—are transitory and which are permanent. Which of the big changes we’ve seen do you think will stick?
TOOZE: First, let’s take the EU. It is made of 26 countries, arguing with one another, each one of them internally politically divided. And so it’s a constantly shifting kaleidoscope of political configurations and coalitions. Whether the innovations of the last year become a precedent for further action or whether they are seen as a warning sign for things you should never repeat will depend on politics. Innovations succeed in part because political coalitions form around them that give them a momentum and weight within an organization.
S+B: In business, it seems, at least from talking to CEOs, like a lot of these trends about rethinking business supply chains, reducing business travel, and generally being more local-minded, are poised to stick. Are they just speaking to a moment, or is the logic of a globalized world in which people and goods are constantly in motion no longer compelling?
TOOZE: It’s probably too early to tell. And I think it crucially depends on the particular sectors you’re in. With regard to the auto sector, which has been by far the largest driver of global supply chains in recent decades, it’s quite clear there are two things at play here. One might very well be regionalization, and you can see a North American cluster, a European cluster, an Asian cluster emerging. The other shift that’s happening is the move to electric vehicles, which is completely reshaping the supply chains in a regional direction. In a sector such as textiles, the logic is driven by labor cost, and it’s a continuation of the pre-crisis trends: more and more labor-intensive work is shifting out of China and toward Vietnam and Bangladesh. With pharmaceuticals, people are talking about regionalization as really important, especially given the complexity of vaccine assembly. That’s a sector, however, where I just hope we see huge capacity expansion. What we actually need is the capacity to bulk-produce vaccine in very high-quality settings. That would reduce globalization, you could say, in the sense that we won’t then be shipping vaccines from the Serum Institute of India to East Africa. But it would greatly disperse and expand the global vaccine industry.
S+B: In Silicon Valley, leaders are always telling us that existing enterprises are legacy ones—which by definition means they’ve lost power, relevance, and currency. What would you say is the utility of studying economic history in a period when so many people seem so invested in us having not that much to learn from economic history?
TOOZE: Part of the reason I’m a contemporary historian is, to a degree, I share their impatience. I don’t have a lot of time for folks who think that the contribution of history should be to somehow rummage around in the present to find something that reminds them of the period of the 20th, 19th, 18th, 17th century they happen to know about. For me, the climate crisis, the demographic explosion of humanity—these are reasons I can see we might not be all that interested in earlier periods. Broadly speaking, of course, the risk with that kind of attitude is it’s basically Philistinism. It basically means I don’t want to read about X, Y, Z, and I just want you to focus on the thing I’m doing. If you are in the business of trying to position yourself in an age of disruption and your claim is that we’re making a fundamental break with what happened 30 years ago, it doesn’t hurt to actually know what that was.
Look, on one hand, I’m not particularly interested in drawing lessons from the Spanish flu because it’s just not our reality. On the other hand, it could be very interesting to understand the 1994 plague outbreak in Gujarat. At the time, the World Health Organization shut down international air travel and was pilloried for doing so, and that may have set the stage for the WHO’s anxiety about shutting down global air travel in 2020. So it might very well be that we need to study history, but history on a shorter time scale.
If history takes seriously the cues of our current moment and says, “Right, if that’s what we’re interested in, maybe this is what we ought to investigate in the past,” then we end up back in a profoundly productive dialogue between the past and the present. If history’s role consists of endlessly trying to tell everyone that we’ve been here before and that these are the rules and historians know them, then I can see why people react allergically.
S+B: If you were making a list of potential global crises that you could be writing about five or six years hence, in your next work of recent history, what might they be?
TOOZE: Well, I would be remiss if I didn’t say at this point that the pandemic shock of 2020 has changed my priors, and I now view pandemics along with climate change as the two big threats. From the 1970s on, virologists and epidemiologists have been warning about this. They were absolutely right. And then, the pandemic doomsday arrived ahead of the climate doomsday. It has killed between 10 million and 18 million people, and caused the most severe economic disruption in recorded history—and it’s not done yet. But we’re already beginning to treat it as a sort of footnote.
- Daniel Gross is editor-in-chief of strategy+business.